LEGAL
OBLIGATIONS
If you are going to be
doing business in British Columbia, there is a very good chance you will be
required to collect tax on behalf of the province. If you are required to register and collect
the tax, failure to do so will result in assessments and penalties. Therefore, it is in the best interest of your
business for you to know your legal tax obligations and to know your rights
under the tax laws.
FIRST THINGS FIRST
There
are a lot of things to think about when starting a new business. When it comes
to provincial taxes, the first thing to do is to make sure you are not
unknowingly running up a tax debt. Many
new business people do not realize that they have to pay tax on their purchases
or leases of equipment and supplies that they use in running their business.
This includes computers, phones/fax, desks and other furniture, office supplies
- basically anything that you did not buy for the sole purpose of selling to
your customers. This misunderstanding
often occurs where the equipment comes from outside British Columbia. Even
though the out-of-province seller may not have collected the tax, you are still
required to pay it.
BUILDING A
TAX LIABILITY
The
other way a new owner of a business can end up with a tax debt is to buy it
along with the business. If you buy a
business with a tax debt, the tax debt becomes yours. To avoid this, make sure your lawyer obtains
a Clearance Certificate from the Consumer Taxation Branch. Contact the people
who issue these certificates for more information. A Clearance Certificate lets you know that
the business you are buying does not have any known tax liabilities with the
branch. However, if a tax liability is
discovered at a later date, even if it was incurred before you bought the business,
it's yours - so be careful when reviewing the company's books.